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Drive for status speeds Indonesia car sales

July 2, 2012

JAKARTA: Tebet is a modest suburb of the Indonesian capital Jakarta, a district where houses cost around US$100,000. On tiny lanes outside many of the red-tiled bungalows sit Mercedes-Benzes, BMWs and Jeeps – imported cars worth as much as the houses themselves.

In the city centre and its more exclusive districts, drivers show off sleek Italian hot rods, grand British-made Bentleys, and top of the range people carriers.

The luxury motors are a sign of the growing wealth of Indonesia’s middle class, the bulging wallets of its rich after years of a mining and stock market boom, and the desire of both to convert their cash into the most prestigious set of wheels they can afford.

Sabam Rajagukguk, who works for a company running nightclubs and bars, used to drive a Toyota SUV but recently traded up to a US$190,000 Land Rover Discovery.

“It makes me feel like the king of the road,” he said. “People care how others see them. A Range Rover is the car for the ‘haves’ now, for a weekday car.”

For a weekend car, the sky is the limit. I see 20-year-olds arriving at clubs in Lamborghinis.”

In Jakarta there is a six-month waiting list for Lamborghini sports cars carrying price tags of up to US$1.2 million. The marque has long been a status symbol in Indonesia, having been majority-owned by a son of former dictator Suharto in the 1990s until he sold it in the 1998 Asian financial crisis.

Slightly below that echelon of the market, Indonesian sales this year by the world’s largest premium carmaker BMW are up 45%, faster than its 25% growth in 2011.

Overall car sales in May surged 57%, the highest in eight months and more than twice the growth seen in China. Also that month, sales doubled of cars with powerful engines above 3,000 cc, despite the near-impossibility of hitting top speed on Jakarta’s gridlocked roads and many bumpy tracks outside town.

For some, one or two cars are nowhere near enough.

“This is for my family,” said Zainudin, the 47-year-old owner of a coal firm on Borneo island, handing over US$300,000 for a Rolls-Royce to add to his collection which already boasts Jeeps, a Land Rover and a Bentley. “I prioritise safety, comfort, a quality engine and better performance,” he said.

Record numbers of vehicles bought in 2011 prompted automakers including BMW and General Motors to invest in manufacturing in Indonesia – a G20 member and the world’s fourth most populous country – as part of a global move towards developing economies as engines of growth.

At the less prestigious end of the market, sales of motorbikes have started falling this year, showing some riders may be swapping two wheels for four, helped by low interest rates for loans.

The Indonesia market is growing but also the range is widening,” said Nissan’s chief operating officer Toshiyuki Shiga, during a visit to Jakarta in June to launch a new low-cost people carrier.

Social climbers

Still, the real action is towards the top end of the market. Western automakers are stepping up their sales efforts, and they are beginning to make inroads in a country traditionally dominated by Toyota.

Ford says it was the fastest growing brand in Indonesia in 2011, while Chrysler equalled 75% of its
2011 sales in the first five months of this year.

“All premium cars are already comfortable. I’m buying for prestige,” said Parlin Sinaga, a 38-year-old Jakarta lawyer, as he bought a canary yellow Ford sports car to go with his BMW.

Long jams of Japanese four-wheel drives clog the entrances to Jakarta’s glossy malls, while inside, luxury automakers have started setting up impromptu showrooms to tempt shoppers to upgrade their rides.

“It’s a unique concept that we started first in Indonesia… Jakarta has become a mall city,” said Ramesh Divyanathan, the head of BMW in Indonesia, where the firm in June launched a new Phantom model of its Rolls-Royce brand.

“Due to the traffic situation, it is easier for customers and the public to see our products at the malls rather than visiting our dealers,” Divyanathan said, adding sales were being driven by people in their 20s and 30s, and aspirational “social climbers”.

BMW has a showroom featuring a sports utility vehicle (SUV), a sedan, a bicycle and toy cars to lure the groups of grandparents, parents and children, often ethnically Chinese, who take family promenades along the aisles of Plaza Indonesia, the traditional shopping destination for the country’s elite.

Nearby in the wealthy suburb of Menteng, tall gates at the bottom of driveways often guard four or more cars, typically Toyotas and at least one Mercedes-Benz, a part of the Daimler stable whose Indonesian sales have grown five times faster this year than in 2011.

Southeast Asia’s biggest economy, where coal mining, palm oil plantations and retail businesses are the major growth industries, is producing millionaires faster than anywhere else, according to wealth management firm Julius Baer.

In the Pacific Place mall across the road from the stock exchange, it’s this new money that the Jaguar and Bentley showroom, complete with a wine bar and leatherbound books to accentuate the cars’ English heritage, is targeting. The mall’s aisles are lined with Volkswagen’s Audis.

At a dealership named “Glamour”, stocked with US$100,000 Jeeps and US$150,000 Range Rovers, a salesman revelled in the status-driven spending spree.

“Customers already have other cars,” he said. “They are buying them for the prestige… the rich are buying them like candy.”



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